Just as the final day of 2025 arrived, the New Year's Eve atmosphere at Financial Street Securities (1476.HK) was abruptly interrupted by a flurry of regulatory penalties.
The Inner Mongolia and Guangdong regulatory bureaus collectively issued seven disciplinary notices against Financial Street Securities, pinpointing four types of violations across its numerous branch offices and employees. This enforcement action came just over three months after the firm officially changed its name from "Hengtai Securities" to Financial Street Securities.
The core issues leading to these penalties primarily involved misconduct in private fund sales and frequent occurrences of "off-the-books" deals, ranging from employees improperly holding assets on behalf of clients to making guarantees of principal and returns. These violations resulted in seven employees being recorded in the integrity database, while the company itself was ordered to increase the frequency of its internal compliance checks.
During the first half of 2025, Financial Street Securities staged a remarkable turnaround, with both revenue and net profit achieving substantial growth. Its brokerage and wealth management, along with investment banking businesses, served as the primary pillars of this increase. However, the penalties stemming from these compliance shortcomings have cast a shadow over this impressive performance report and may simultaneously force the brokerage to accelerate upgrades to its internal controls.
A review of the penalty notices reveals that the violations by Financial Street Securities mainly included the improper sale of private funds, "off-the-books" sales, unauthorized asset holding and fund pooling, and promises of guaranteed principal and returns. These issues involved four branches in the Inner Mongolia region and one branch in the Guangdong region.
Disclosures from the Inner Mongolia regulatory bureau indicated that employees at three of the firm's local sales departments committed significant violations in their private fund sales businesses.
Specifically, Ma Tian, an employee at the Baotou Gangtie Street Securities Sales Department, engaged in conduct that provided improper benefits to clients during the sale of the "Lehe Zhonghe Film and Television Tiered Equity Private Investment Fund" (hereinafter referred to as the "Lehe Fund").
The violations by Kang Cheng, an employee at the Hohhot Daxue West Street Securities Sales Department, were more severe. He not only privately organized multiple investors to sign agreements for jointly purchasing the Lehe Fund but also pooled client funds into his personal account for centralized subscription,涉嫌违规代持及资金归集.
Hao Lizhen, an employee at the Hohhot Xincheng North Street Securities Sales Department, failed to use company-approved promotional materials when recommending the same fund product, and the materials she used contained statements that could mislead investors about the risks.
The aforementioned violations primarily contravened regulations such as the "Compliance Management Measures for Securities Companies and Securities Investment Fund Management Companies" and the "Interim Measures for the Supervision and Administration of Private Investment Funds." They also reflected shortcomings in internal control and compliance management, as well as insufficient effectiveness in controlling employee conduct.
The Inner Mongolia regulatory bureau imposed administrative supervisory measures, issuing warning letters, against Ma Tian, Kang Cheng, and Hao Lizhen, and recorded them in the securities and futures market integrity database. The regulators explicitly required these three employees to earnestly enhance their compliance awareness and prevent any recurrence of such violations.
Running parallel to the private fund sales violations was the issue of "off-the-books" deals by Financial Street Securities employees, which exhibited cross-regional and collective characteristics.
Disclosures from the Guangdong regulatory bureau showed that Lu Mingbin, an employee at the Chaozhou Xitai Avenue Securities Sales Department, during his tenure, improperly sold products not distributed by the company to investors and obtained improper benefits from doing so. He also engaged in behavior that involved improperly promising guaranteed principal and returns.
As the sales department failed to effectively identify and prevent the associated compliance risks, exposing a lack of internal management, it ultimately received a warning letter from regulators. Lu Mingbin was required to attend a regulatory interview with the Guangdong bureau.
Further disclosures from the Inner Mongolia regulatory bureau indicated that "off-the-books" sales behavior was more concentrated in its local branches.
Three employees - Lu Wenlong, Wang Xin, and Wang Lihong - from the Financial Street Securities Yakeshi Qingsong Road Securities Sales Department had long been recommending and selling products issued by the platform of Beijing Hengtai Puhui Information Service Co., Ltd. (hereinafter referred to as "Hengtai Puhui") to clients.
Financial Street Securities was ordered by the Inner Mongolia regulatory bureau to increase the number of its internal compliance inspections. According to the regulatory determination, because the company's internal controls and compliance management were inadequate, failing to prevent concentrated cross-regional and multi-personnel violation risks, the company is required to complete rectifications within three months of receiving the decision. Furthermore, from January to December 2026, it must conduct internal compliance inspections quarterly, submitting a report to the Inner Mongolia bureau within 10 working days after each inspection.
"Off-the-books" sales in the securities industry primarily involve financial institution employees privately peddling third-party wealth management products to clients that are neither issued by their own institution nor covered by a distribution agreement with it, in order to obtain commissions.
"Off-the-books" products are often packaged as "high-yield, low-risk," but carry extremely high risks. Investors need to verify product information through official channels and avoid transferring funds to personal accounts.
The causes of "off-the-books" behavior are twofold. On one hand, the large number of frontline employees in brokerage businesses increases management difficulty. Additionally, grassroots employees often face performance pressure, which may lead some to resort to违规行为 such as promising principal protection or sharing profits to meet targets.
As early as 2018, Hengtai Securities, then part of the "Tomorrow系" financial empire, was penalized by the Inner Mongolia regulatory bureau for distributing Hengtai Puhui's P2P products without a distribution agreement, clearly violating Article 9 of the "Provisions on the Distribution of Financial Products by Securities Companies." The recent violations by multiple employees represent a continuation of this historical misconduct,同样也缺乏合法代销授权.
The compliance deficiencies of Financial Street Securities' branches are evident not only in its main business operations but have also spread to its subsidiaries.
At the end of September 2025, Financial Street Securities' wholly-owned investment banking subsidiary, Hengtai Changcai Securities, received a warning letter from the Anhui regulatory bureau for failing to prevent the misuse of bond proceeds.
Investigations revealed that as the trustee for corporate bonds including "23 Huaikong 01," Hengtai Changcai Securities did not diligently fulfill its supervisory duties, failing to promptly obtain documentation related to the issuer's use of raised funds. This led to over 60% of the proceeds being misappropriated by the controlling shareholder, an action that breached the "Administrative Measures for the Issuance and Trading of Corporate Bonds." This was not Hengtai Changcai Securities' first violation.
Back in March 2024, Hengtai Changcai Securities had received a written warning from the Shanghai Stock Exchange for insufficient verification of public opinion related to a bond project and failure to disclose risks in a timely manner, indicating that weaknesses in compliance and risk control had long been present.
Simultaneously, these compliance loopholes triggered a large number of legal disputes. Throughout 2025, Financial Street Securities received nearly 200 court hearing announcements, of which over 180 were related to entrusted wealth management contract disputes, accounting for over 90% of the total. This equates to approximately three related lawsuits occurring every five days.
These disputes primarily focus on private placement products sold by the company between 2023 and 2024, including the Lehe Fund mentioned in the recent penalties, as well as several over-the-counter wealth management products that did not undergo proper compliance approval procedures.
This concentrated outbreak of violations and disputes are all historical legacy issues predating the rebranding of Financial Street Securities, stemming from compliance gaps during the former Hengtai Securities era.
Financial Street Securities, formerly known as Inner Mongolia Securities Co., Ltd., established in 1992, was renamed Hengtai Securities in 2002 after a capital increase approved by regulators, with its registered office in Hohhot. In October 2015, the company was listed on the Hong Kong Stock Exchange as "Hengtou Securities," raising HK$1.746 billion and becoming the first listed securities firm from Inner Mongolia. In 2017, Financial Street Investment Group made its first strategic investment. In 2020, Tianfeng Securities acquired a 20.43% stake, becoming the largest shareholder of Hengtai Securities. In 2022, the former transferred part of its shares to Beijing Huarong Comprehensive Investment Co., Ltd. In January 2023, regulators approved Beijing Huarong as a major shareholder of Hengtai Securities, and the Financial Street Group formally obtained actual control. After over two years of restructuring, on September 9, 2025, the former Hengtai Securities completed its industrial and commercial registration change, officially renaming itself Financial Street Securities. The name of the Hong Kong-listed entity was also changed simultaneously, marking the official start of the state-owned capital-led transformation. Financial Street Securities currently has 108 branches, many of which in Inner Mongolia and Northeast China were established during the Hengtai Securities era. Its grassroots employee team exhibits strong stability, with some personnel's professional habits not adjusting in sync with the change in ownership.
In the first half of 2025, Financial Street Securities' performance rebounded significantly, with notable growth in brokerage and wealth management, and investment banking businesses; however, investment management performance dragged down overall results. Looking at the overall performance, the company achieved operating revenue of 1.398 billion yuan in the first half, a year-on-year increase of 43.38%, and net profit attributable to shareholders of 241 million yuan, a surge of 346.86% year-on-year.
As the core engine of performance growth, the brokerage and wealth management business achieved operating income of 951 million yuan in the first half of 2025, a 36.19% increase year-on-year, primarily benefiting from two factors.
First was the rapid expansion of its client base. The total number of clients reached 4.1189 million, a 3.21% increase from the end of 2024, with 143,900 new accounts opened. Client assets under custody totaled 1.89 trillion yuan, up 5.55% year-on-year. Second was the enhanced professional capability of the investment consultant team, with product excess return coverage reaching 82%.
In the first half of 2025, the investment banking business completed 24 corporate bond underwriting deals, totaling 56.52 billion yuan, and 4 New Third Board financing projects, serving 6 technology companies in equity and debt financing. However, despite support from bond underwriting volume, the IPO business of Financial Street Securities was nearly non-existent due to industry-wide tightening of equity financing. Currently, against the backdrop of increasing concentration among top-tier brokerages, the生存空间 for small and medium-sized securities firms continues to be squeezed.
Digital transformation is also progressing. On December 11, 2025, Financial Street Securities signed a strategic cooperation agreement with Tonghuashun, moving their collaboration from "point-based coordination" to a stage of "comprehensive integration."
The performance of the investment management business was not ideal. In the first half of the year, this business segment generated revenue of 132 million yuan, a decrease of 12.85% year-on-year. Affected by adjustments in the bond market, total assets under management were 153.334 billion yuan, down from the end of 2024.
Having been renamed for only three months, the market still holds a "Hengtai" memory of Financial Street Securities. Following these violations, the company needs to allocate additional resources for compliance inspections, submitting four compliance inspection reports in 2026. Business expansion during the rectification period will face certain constraints, especially in high-risk areas like private fund sales and product distribution. On the other hand, it must prevent grassroots employees from taking risks due to performance pressure.